Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

What would you like to follow?

The U.S. Energy Department's weekly inventory release showed a larger-than-expected decrease in natural gas supplies. However, the positive sentiment was overwhelmed by the lack of meaningful demand amid strong production, which led prices to trickle down.

Storage Number Beat Estimates but Fell Short of the 5-Year Average

Stockpiles held in underground storage in the lower 48 states fell by 107 billion cubic feet (Bcf) for the week ended Dec 13, above the guidance (of 93 Bcf fall). However, the decrease was lower than the five-year (2014-2018) average net shrinkage of 112 Bcf and last year’s drop of 132 Bcf for the reported week.

The fifth withdrawal of the year puts total natural gas stocks at 3.411 trillion cubic feet (Tcf) - 618 Bcf (22.1%) above 2018 levels at this time though supplies remain 9 Bcf (0.3%) under the five-year average.

Fundamentally speaking, total supply of natural gas averaged 100.6 Bcf per day, essentially unchanged on a weekly basis as marginally lower dry production was offset by increased shipments from Canada.

Meanwhile, daily consumption rose 5.6% to 118 Bcf compared to 111.7 Bcf in the previous week primarily due to stronger demand from the power and residential/commercial sectors.

Prices Fall Back Despite Higher-Than-Expected Drawdown

Natural gas prices edged down 1.3 cents (or 0.6%) to $2.273 per MMBtu yesterday despite a government report that beat estimates to the upside. The marginal decline could be attributed to projections of warmer-than-usual temperatures during the next few days that calls for the heating fuels’ lower consumption, at least for the short term.

Record Output to Offset Rising Demand

The demand for cleaner fuels and the commodity’s relatively lower price has catapulted natural gas' share of domestic electricity generation to 37%, from 25% in 2011. Moreover, new pipelines to Mexico, together with large-scale liquefied gas export facilities have meant that exports out of the U.S. are set for a quantum leap. Finally, higher consumption from industrial projects will likely ensure strong natural gas demand.

However, record high production in the United States and expectations for healthy growth through 2020 means that supply will keep pace with demand. Therefore, prices are likely to trade sideways but for weather-driven movements.

Expect Price Volatility on Weather and Storage Levels

Natural gas might experience short-lived surge based on positive weather forecasts but any powerful turnaround looks unlikely at the moment. With gas output in the lower 48 states recently hitting a record 92.8 Bcf per day, there is little room for prices to improve meaningfully from their current levels of around $2.3 per MMBtu.

The bearish natural gas fundamentals and its seasonal nature is responsible for the understandable reluctance on investors’ part to dip their feet into these stocks. In fact, the commodity fell to more than three-year lows in August.

If you are still looking for near-term natural gas play, CNX Resources Corporation (CNX - Free Report) might be a good selection. The Canonsburg, PA-based company – with a Zacks Rank #2 (Buy) – has seen the Zacks Consensus Estimate for 2019 rise 19% over 60 days.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

Client Support

Follow Us

Zacks Mobile App

Zacks Research is Reported On:

Yahoo

MSN

Marketwatch

Nasdaq

Forbes

Investors.com

Morningstar

This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Verizon Media; Microsoft Corporation; Nasdaq, Inc.; Dow Jones & Company; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +23.52% per year. These returns cover a period from January 1, 1988 through May 4, 2020. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

Visit performance for information about the performance numbers displayed above.

We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms and Conditions of Service.